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Sohodojo Advisory Board Member
Jim Schneider
The Taxman86 Speaks...
11 August 2000
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Where Are All The High Tech Employees; Telework Is In; California Wants Its Sales Tax.

1. The word is out, you need to build a 24-hour environment.

San Francisco is unique, and at $60+ per foot for office space, highest in the nation, it is having its troubles [San Diego's is about $20]. High rents are changing the neighborhoods. "Growth Willie Style," says it all in the SFGATE. But it is not as simple as it looks.

"You have to build a 24-hour environment," said Robert G. DePew, president of Robert G. DePew & Associates in Lanham, one of the partners of Patuxent Run Associates LLC, the joint ownership developing the property. "The community needs to appeal to high- tech workers and their specific demands in order to succeed," he said.

"Especially in today's market of record low unemployment with no end in sight," he said, "employers are looking for communities that offer convenience, a short commute and upscale retail..." We hate to say it but that is San Francisco, Washington, D.C.

Could downtown San Diego be far behind? Not too far if you believe the recent hype about the $600M of private monies coming into the San Diego Enterprise Community. Does John Moore know something we do not, like how to get 26 blocks of "downtrodden land" near the waterfront for a few dollars.

If we are correct, then come next month, and passage of H.R. 4923 "The Community Renewal and New Markets Act of 2000," they will be lining up for his 700,000 sq. ft. of office and 300,000+ sq. ft. of retail, 600 units of housing, 1500 hotel rooms, and 2000 parking spaces.

The term "live/work/play" seems to be the in thing, and Mission Valley San Diego has it all, according to some, but the tax incentives of a "no capital gains" in the San Diego Enterprise Community [it is located between Mission Valley and the Waterfront] to the lucky employees when their employer goes public or sells out, that could change alot of things. The problem is that this opportunity only applies for investments made after next month, and excludes residential developments [work/live is not residential].

2. Call it Telework or Telecommutting, it is a hot political issue.

And Telecommutting is getting front page attention by those turned off by commuting. Is it possible that help is on its way? Senator Santorum thinks so when he introduced S. 2431 the "Telework Tax Incentive Act" in April. A similar bipartisan bill had been introduced in the House in March by Rep. Wolf [H.R. 3819]

Our spin on all this is: to bring Affordable Housing and Telecommutting into reality, we suggest that employers create company owned or leased housing, and then require that those employees assigned to the "On-Call/telework" detail live near the main facility. If properly handled the "Employer Business Premises" can be extended to these work/live situations, and as such could be covered by IRC Section 119, the meals and lodging exclusion. Suppose that employer housing is in an Enterprise Community or Empowerment Zone that is contiguous to the census tract of the employer? Is it possible that the Employer may now become an Enterprise Zone Business [that requires 35% or the full or part time employees to live in the area] and get the proposed tax incentives? We think so.

By the way Mayor Willie Brown's Dot-Com Land Use Moratorium grants exceptions to those businesses that provide affordable housing for their employees. He has seen the light [San Francisco is always ahead of the curve], with potential tax advantages no less.

3. The next big cyberspace legal battle could be over sales taxes.

The U.S. Supreme Court suggested that a state had to show 'Nexus', with the state before it could require an out of state company to collect sales taxes from its residents. Now California is about to "Clarify" the meaning of Nexus for On-line Retailers affiliated with bricks and mortar facilities within California. The current federal Moratorium on Internet Taxes forbids "new taxes" which includes those not actively enforced before the Moratorium, during the moratorium period; is this a new tax or one that was not actively enforced? What happens to Amazon.Com when it links up with Toys 'R' Us?

Jim Schneider, LL.M.

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